Owning your home is probably the greatest asset you have. But getting a loan based on the equity of your home is one of the greatest mistakes you can make. The elderly, low-income families and people with poor credit should beware when borrowing money against the equity of their home. Certain lending agencies are not very reputable and they often exploit homeowners by hiding loan terms and additional charges to stripping and flipping your loan. There are a few things to watch out for so you can be well informed and prepared to handle this situation if it ever happens to you.
If you are at a point in your life where you really need money and do not have a steady income, shady lending companies will let you slide. They will tell you to pad your income, or make one up essentially. They may even tell you that it really doesn't matter if you lie about your income. The lender doesn't care if you don't have the money to pay your loan every month because they can just foreclose on your home. You don't have a steady income to pay the loan back, and these lenders know this. Your equity will be stripped after years of building it up and you will be left with nothing.
Many homeowners find themselves one step away from foreclosure and a lending company tells them that they can save them from foreclosure. They may refinance your mortgage with a lower payment each month, but if you don't read the fine print you may lose your entire investment. The reason for the lower payments may be because you are only paying on the interest. At the end of the loan term, the last payment is one lump payment of everything else you own. If you can't pay this, you face foreclosure once again and will probably lose your home.
You may get to a point where your lender tells you that your home will be foreclosed on and taken away from you. Another lender may call you offering to help you out and all you have to do is sign over the deed to your home for a short time to prevent foreclosure. Once you do this, the loan they promised you may never come. In the meantime, this lender has already borrowed against your home or may have even sold it to someone else. There's nothing you can do about it because you willfully signed over your deed and now instead of owning your own home, your mortgage payments can be treated as rent. If you miss a payment, the new homeowner will have the legal right to evict you from your own home.
All of these scenarios sound scary, but they are unfortunately all too real. However, you can prevent this from happening to you by simply remembering these few things: never agree to a loan if you don't have a monthly income, always read everything before you sign it and never let someone pressure you into signing over your deed. It only takes a moment to check on the lending office. You can call the Better Business Bureau or even ask around. A few minutes of your time could save your equity and it could even save your home.
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